"This
game is a highly structured exercise in labor-management
bargaining. If union and management cannot reach
agreement within two days, then the union will strike.
The costs of a strike are not the same for the two sides.
Similarly, the cost of a settlement to management differs
from its benefits to the union. Union and management
players frequently feel that they are more powerful, hold
out, endure a strike, and do poorly relative to other
players."

"A
negotiation exercise between Riverside Lumber Co. and the
Division of Environmental Conservation about reducing the
effects of effluent discharge in a river. Students are
assigned to a role and receive confidential information
including a scoring system detailing the costs and
benefits of various proposals. Though their interests
conflict, joint gains beyond simple agreement can be
found. Students come to see that joint gains must be
created and divided and that the tension between
competitive and cooperative urges often lead to inferior
agreements. Means for managing this tension can then be
discussed. This game can be used as a complex example of
bargaining with incomplete information."

Designed to
teach students about the trade-offs faced by firms
exploring alternative approaches to complying with
pollution control regulations. The setting is the U.S.
electric utility industry in 1993.

"In
accordance with the provisions of the 1990 Clean Air Act,
coal-burning utilities must lower their emissions of SO2
(sulfur dioxide) significantly by 1995, and then reduce
their emissions by an additional 50% by the year 2000. In
this stylized negotiation each utility has the option of
complying with the regulations through one of three
methods: 1) by installing pollution control equipment
('scrubbers'); 2) by substituting high sulfur coal;
and/or 3) by purchasing tradeable SO2
allowances from other firms that overcomply with the
emission control legislation. Not only must each utility
reduce its emissions by a different amount, but the costs
faced by each firm with respect to scrubbing and fuel
switching differ as well. Also, assumptions relating to
the state regulatory environment differ across
negotiating groups. Negotiations take place in groups of
four utilities and separate scenarios are available for
three distinct groups. (See Supplements)."

In Levy and
Bergen, the class is divided into small groups of 2-3
students each. Each group is supplied with a basket
containing food items and utensils, but not each basket
contains both. The items in each basket make for an
incomplete meal but the total amount of food distributed
is enough to feed the entire class. Students are allowed
to make whatever trade they desire; the only restrictions
are that trades based on credit are not allowed and
unused items must be returned to the instructor. Students
record their initial endowments, final consumption
bundles, and all trades on a simple form. After all
trades have been made, the instructor leads the class in
a discussion focusing on the properties of barter
exchange relative to monetary exchange.

Fried and Levy is identical except that some
baskets contain some beans and there are two trading
periods. At the end of period one, each group has to pay
a previously announced 'tax' in the form of beans. Before
play, it is also announced that at the end of period two,
another tax is due, but that the size of that tax will
only be announced at the beginning of period two.
Students may not eat until the end of period two.
Unsurprisingly, beans obtain value as a medium of
exchange.

The class is
divided into 6 teams of students, each representing a
supplier. Each team is given a handout that lists
absolute price increases for each firm during the
(fictitious) last eight time periods. The handout also
lists the average price increase across all six firms
(randomly drawn from a normal distribution with mean=5
and standard deviation=2.5). Thus, firms with below
average price increases should consider lowering
production, firms with above average price increases
should consider expanding production, and firms with
average price increases should neither expand nor
contract production.

Two practice
rounds (time periods 9 and 10) are played. Each team is
given a card that lists the absolute price increase for
its firm only. The teams have to decide whether to
expand, contract, or leave production unchanged (signaled
by "+," "-," and "0"
cards). Unknown to the students, the mean is again set at
5, with a standard deviation of 2.5. Based on the 'last'
eight rounds, typically the teams' "+"s and
"-"s even out, so that aggregate supply stays
unchanged.

For the first 'real' round (time period
11), the average price increase is changed, unexpectedly
and unknown to the students, to 8 percent. But on the
basis of the past 10 rounds and with teams only knowing
their own firm's price increase, all six firms
will typically expand production, thus increasing
aggregate supply. By round 12 (mean=8 again), teams begin
to show adaptive expectations. So, for round 13,
the instructor changes the mean again (mean=11), catching
the teams off-guard yet again, and by round 14, the teams
probably adapt once more.

After each round, there's a bit of
discussion permitted among students and instructor. By
round 15, you may find students asking for additional
information, and the instructor could 'publish' past and
announced monetary targets (set at mean price plus 2
percentage points). "From this point on [i.e., when
a monetary target is published], the teams will be quite
accurate in their forecasts of inflation; subsequent
rounds demonstrate that the monetary authorities are
powerless to influence aggregate supply. Rather, any
fluctuations in output are due to random disturbances
associated with imperfect correlations between the money
supply ... and average price increases" (Peterson,
1990, p. 75).

Class size:

Sufficient to
allow for 6 teams of students (could be adapted for
larger classes)

A dollar bill
is auctioned off under the following rules. The auction
is conducted as an English auction with the highest
bidder winning the dollar. All bids are recorded on the
blackboard. The winning bidder must pay a price equal to
his or her bid. All other bidders must also pay a price
equal to their bid, though none of them get the dollar.
The auction inevitably leads to a "bidding war"
as bidders realize that, if they are not the high bidder,
they will "lose" an amount equal to their bid
with nothing to show for it. After the auction, the
instructor informs the class that he will return the
auction proceeds to the class, but they must decide how
to divide it up. The resulting discussion among students
can lead to an interesting foray into further questions
of allocation and fairness.

Class size:

Any size.

Time:

15 to 20
minutes.

Variations:

Allow
students to collude during a bidding round by encouraging
communication among students. Instead of requiring all
bidders to pay their bids, require only the top two.

Students are
paired up and given the task of dividing a fixed sum of
money. The Proposer makes a proposal to the Responder,
who can either accept or reject the proposal 
negotiation is possible. If the proposal is accepted,
students earn the amounts specified in the proposal. If
the proposal is rejected, each student receives a zero
payoff. The game is played for 10 rounds.

Class size:

Any number of
students.

Time:

30 minutes.

Variations:

Instructor
could allow players to openly communicate with each
other, students could play against an anonymous partner,
or substantially higher stakes could be used.

Simple pit
auction market in which students are divided into two
equal groups of buyers and sellers and each student is
provided with different reservation prices. Students
gather at the front of the room and proceed to negotiate
trades with each other over a series of periods.

Class size:

8 to 30

Time:

30 minutes.

Variations:

Instructor
may impose price ceilings, floors, issue licenses to
subset of sellers, or divide sellers into domestic
sellers and foreign sellers, and some of the foreign
sellers are prohibited from selling in the market.